Social Reinforcement: Cascades, Entrapment and Tipping

Heal, Geoffrey M.; Kunreuther, Howard

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Social Reinforcement: Cascades, Entrapment and Tipping

American Economic Journals: Microeconomics, Vol. 2, No. 1, pp. 86-99, 2010

14 Pages Posted: 22 Oct 2011

See all articles by Geoffrey M. Heal

Geoffrey M. Heal

Columbia University - Columbia Business School, Finance; National Bureau of Economic Research (NBER)

Howard Kunreuther

National Bureau of Economic Research (NBER); University of Pennsylvania - Wharton Risk Management and Decision Processes Center

There are 2 versions of this paper

Date Written: 2010

Abstract

The actions of different agents sometimes reinforce each other. Examples are network effects and the threshold models used by sociologists as well as Harvey Leibensteins's "bandwagon effects." We model such situations as a game with increasing differences, and show that tipping of equilibria, cascading and clubs with entrapment are natural consequences of this mutual reinforcement. If there are several equilibria, one of which Pareto dominates, then the inefficient equilibria can be tipped to the efficient one, a result of interest in the context of coordination problems. We characterise the smallest tipping set.

JEL Classification: C72, D80, D85, Z13

Suggested Citation: Suggested Citation

Heal, Geoffrey M. and Kunreuther, Howard C. and Kunreuther, Howard C., Social Reinforcement: Cascades, Entrapment and Tipping (2010). American Economic Journals: Microeconomics, Vol. 2, No. 1, pp. 86-99, 2010 , Available at SSRN: https://ssrn.com/abstract=1947007